Back to basics – requirements for contracts for sale of land

• United Kingdom

• Real estate litigation

22-05-2019

Alexander Kuznetsov v Camden London Borough Council [2019] EWHC 805 (Ch)

In an application for relief from sanctions, the Claimant tenant, Kuznetsov, persuaded the High Court that it had a real prospect of establishing at trial that a letter between him and the Defendant landlord, Camden Council, amounted to a contract for the sale of his lease.

Kuznetsov had a long lease of a flat on an estate owned by the Council.  The Council obtained planning permission to redevelop the estate and in order to carry out the redevelopment work it needed, and secured, possession of Kuznetsov’s premises.  This dispute turned on the basis on which possession was secured.

The Council had made attempts to purchase the property from Kuznetsov but it claimed that no agreement was reached and it therefore made a compulsory purchase order, had the property vested in it and left Kuznetsov to claim statutory compensation.

Kuznetsov claimed, however, that a binding sale and purchase agreement had been reached between him and the Council and referred the Court to a letter from the Council to Kuznetsov in which the Council made an offer to him to purchase the property for a price to be determined by a surveyor carrying out a “Red book” valuation.  The letter had been countersigned and dated by Kuznetsov and returned to the Council with the wording “Thank you! I accept your offer and will instruct a valuer, as requested”.

Kuznetsov wanted the Council to honour that agreement and applied to the Court for specific performance of the contract.  The Council, however, sought and secured an order striking out the claim as originally drafted.  It was Kuznetsov’s application for relief from strike out which now came before the Court.

After some consideration the court concluded that there was a real prospect that Kuznetsov could establish at trial that an open contract for sale had been reached. The order to strike out was set aside and the application for specific performance could proceed.

Key points

• s2 of the Law of Property (Miscellaneous Provisions) Act 1989 set out the strict requirements necessary to create a contract to dispose of land, being that it be in writing, be signed by the parties and incorporate the terms – the parties, property and price.  These requirements offer parties certainty as to terms but also to some extent as to when formal and binding contracts have been concluded.
• The case offers a reminder, however, to take great care when negotiating agreements so as to avoid inadvertently creating a binding contract.  Parties should mark documents “subject to contract” until the agreement is concluded to avoid any arguments on the issue.